Trump has failed to fix NAFTA

Despite pledging to fix the North American Free Trade Agreement (NAFTA), President Trump’s trade policies have failed to put North American workers first, according to a new Economic Policy Institute report.

Trump replaced NAFTA with the United States-Mexico-Canada Agreement (USMCA) in 2020. But Trump’s USMCA has not fixed the intense downward pressure on jobs and wages that has plagued U.S. manufacturing economies in the generation since NAFTA.

Manufacturers across the country have shed or furloughed more than 576,000 jobs since he signed the agreement, EPI’s analysis shows. The U.S. trade deficit with Mexico and Canada has more than doubled from $125 billion in 2020 to $263 billion in 2025.

In the critical automotive industry that Trump said he wanted to restore, imports of motor vehicles and parts from Mexico nearly doubled following USMCA, rising from $196 billion in 2019 to $274 billion in 2024. During the same time period, light-duty vehicle imports from Mexico rose 36% while imports of medium- and heavy-duty vehicles increased a whopping 256%.

Despite novel labor reforms in USMCA—some worth preserving and expanding—the overall wage gap in manufacturing continues to drive corporate decisions to exploit Mexico’s low-wage, low-standard labor environment. Mexican manufacturing wages are just $2.76 an hour—a mere 10% of U.S. manufacturing wages. This has created a race to the bottom in labor and pollution standards for producing goods that can compete duty free in North American markets.

USMCA also left a gaping loophole for Chinese manufacturers to exploit duty-free access to North American markets without reciprocal market access for U.S. manufacturers. Chinese firms expanded their direct investment footprint in Mexico by as much as 288% through 2023.

Now USMCA faces a sunset review, requiring all three countries to agree by July 1, 2026, to extend the agreement another 16 years. Trump and his negotiators should use this opportunity to cement a model that protects workers while preserving the mutual benefits of trade. This requires stronger regional and labor value content rules, closing loopholes to unfairly traded foreign content, and expanding cooperation to enforce strong rules across all three countries.

“Trump seized on dissatisfaction with NAFTA and its devastation on U.S. manufacturing. But his USMCA created more problems than it fixed. Today, the pressure on manufacturing jobs and deterioration in the trade balance with Mexico are worse than before USMCA. The ongoing failures of USMCA necessitate significant reform and renegotiation to truly make a North American economy that puts workers first,” said EPI senior economist Adam S. Hersh, who authored the report.